[crazygringo]

That's just a snarky way to describe all business investment that requires purchasing things made in the future. It's entirely normal.

You could literally rewrite the quote to be about iron and about building railroads for trains and passengers that don't exist yet. See how silly that would be?

Except the "profit that is mathematically impossible" part. That's just made up and false. It's entirely possible that we are actually underestimating demand, and there is going to be tons of profit. Nobody knows for sure, but profit is very, very, very possible.

[Kim_Bruning]

> You could literally rewrite the quote to be about iron and about building railroads for trains and passengers that don't exist yet. See how silly that would be?

Couldn't possibly happen with railroads!

https://libertystreeteconomics.newyorkfed.org/2016/02/crisis...

[crazygringo]

My point is, railroads turned into a real thing. The demand was real and the general large-scale investment was justified.

Just because some companies made bad decisions doesn't mean the railroad industry as a whole was some kind of mirage or mistake. Laying down tracks for trains and passengers that didn't exist yet is still necessary.

[array_key_first]

Didn't that actually happen with railroads? Like, there was a railroad bubble and lots of people lost a lot of money?

It happened with the Internet, too, and the Internet is pretty useful I think.

[adampunk]

Most of the panics of the 19th century would have been stopped by a strong central bank, deposit insurance and fiat currency.

[d3rockk]

>Except the "profit that is mathematically impossible" part. That's just made up and false. It's entirely possible that we are actually underestimating demand, and there is going to be tons of profit.

JP Morgan says $650 billion in annual revenue required to deliver mere 10% return on AI buildout is equivalent to $35 payment from every iPhone user, or $180 from every Netflix subscriber 'in perpetuity.'

Very, very, very unlikely it makes profit, which why AI keeps getting overhyped by CEOs.

[WarmWash]

Altman said months ago that they are expecting around $65/user/month from ad-supported ChatGPT. A strong hint about where they see account prices in the future.

When you run the numbers, $65/mo turns AI investment into a a 5-7 ROI, which is totally within normal bounds.

Considering there are over a billion unique weekly active users for the major labs, and demand has been relentless, it's a pretty easy sell to get investors on board.

"You pay internet, you pay phone, you pay AI".

[kartoffelsaft]

Those numbers sound... unrealistic to me. Just doing some napkin math: 65 $/user/month / 0.01 $/ad ~= 6500 ads/user/month, which is about an ad per minute if you assume someone is using the chat interface 4 hours a day including weekends. Maybe you see that behavior from "my GF/BF is AI" types but I'm also already assuming 0.01 $/ad which is super high to my understanding (if you work in adtech please correct me if I'm wrong). I don't forsee over 50% of your workday or leisure time spent in ChatGPT as likely, especially if the ad rate is well beyond YouTube's nigh-unusable amount it is now.

[realusername]

There's never going to be 65$/user/month, they already struggle to move past 5% of paying users with the current pricing.

[strangegecko]

Did they consider that profits on the build out won't be uniform, i. e. there will be some companies that go under but the rest of them will capture the profit?

[crote]

Some companies going under doesn't change anything about the market as a whole.

If the demand is real and the company just sucked, their users and infrastructure will end up at a competitor: the value for that one company is bigger, but the overall per-user bill remains about the same.

If the demand is fake the infrastructure will be sold off at a big loss, allowing new companies to enter the market with far smaller investment costs, allowing them to undercut the competition, driving down the price users expect to pay for compute, resulting in a race to the bottom between the remaining AI companies in an attempt to attract enough users that their hardware won't sit idle - which in turn makes it far less likely that they'll be able to hit those revenue figures. And a bunch of investors just lost a few billion dollars, of course.

[croes]

And the rest still bought RAM, GPU and datacenters.

What a giant waste of resources that are missing elsewhere

[crazygringo]

Consider that a large majority of the revenue will come from businesses.

Even $100 per month per employee will likely turn out to be quite reasonable, if it can make employees more productive by several hundred dollars per month.

[HDThoreaun]

AI labs selling a billion subscriptions for $1000/yr is absolutely on the table.

[Jyaif]

it could replace a bunch of $100k+/year workers.

[realusername]

Well, even these AI companies cannot manage to replace these workers themselves.

[fodkodrasz]

the big question is: who would pay for those services then?

I mean I love simplicity, and if economy could be simplified to a big money printer machine directly printing the money to a burner, then it would be so simple, that even a short context window could comprehend the economic cycle finally!

[croes]

Where does the money for that profit come from?

Who buys anything made by AI if he could do it by AI themselves?

Who can afford AI if their customers do with AI what they do?

Who creates the next man made code needed as training data to prevent model collapse?

[Shog9]

Uh... The history of railroads is littered with folks losing their investments for exactly this reason.

Was your point that owning the steel companies is the path to riches even when most of the railroads fail?